Commercial Real Estate & Office Rental Market – Chatswood

Located 8.5km
to the north of the Sydney CBD, Chatswood is the transport and economic nerve
centre of the Upper North Shore. Chatswood currently ranks as Sydney’s third
largest CBD. As home to NSW’s second biggest retail precinct – including
Chatswood Chase, Westfield and Lemon Grove, Chatswood is also a leading shopping
and entertainment destination. [1]Chatswood’s
commercial heart sits between the Pacific Highway and the North Shore rail
line. A construction boom during the 1980s and 1990s saw the area transition to
a high rise precinct.[2]Residential
development took off in the 2000s and nowadays residential and office towers
sit side by side.Chatswood houses major
rail and bus interchanges linking it to the Sydney CBD, the Upper and Lower
North Shore suburbs and Sydney’s North West. The area is poised to benefit from
growth in the burgeoning Hills district with the construction of the Sydney Metro
Northwest rail link. The $8.3b project will connect Chatswood to Rouse Hill by
2019.[3]Recently the State
Government proposed a major extension to its Metro Rail Link project connecting
Chatswood with Bankstown. The plan entails a second harbour rail crossing and a
number of new stations in the CBD and inner city suburbs[4].
Such improved access to Greater Sydney should only improve Chatswood’s appeal
as a place to do business.Renting an
office in Chatswood gives your business access to world class amenities,
excellent transport and parking, top tier retail and a thriving café and
restaurant scene. It is little wonder that companies from across a broad range of
industries – from engineering and construction to IT & T through to insurance
and professional services, are based there[5]. Some of the
corporate heavyweights headquartered in Chatswood include CSR
Limited, Smith's Snackfood, Abigroup, Coffey, Pepsico , Carter Holt HarveyNortel
Networks, Optus, Lenovo, NEC, and Cisco Systems[6].Chatswood’s
commercial real estate market has been one of the best performing in the nation
over the past eighteen months. Headline office vacancies rates have tumbled
from 10.8% to 6.8% for FY15.[7]In stark
contrast to other Australian office markets, vacancies in Chatswood’s secondary
properties are tight. According to Knight Frank the vacancy rate for lower
grade space has plummeted to 6.6% - its lowest point since 2002.[8]Chatswood
landlords have benefitted from a perfect storm of growing tenant demand and
shrinking supply. On the demand side established players like Lenovo and Huawei
have expanded their tenancies whilst new entrants such as Stellar Asia and
Creston Electronics, have contributed to the squeeze.[9]At the same
time Colliers believe that commercial floor space in Chatswood has peaked. The
area has experienced significant stock withdrawals for residential conversion
and there are no new buildings in the pipeline. As residential conversion trend
continues Colliers expect the supply pool to dwindle further.[10]Unsurprisingly
given the high demand /falling supply dynamic, Chatswood office rental rates
have been edging up. As at July 2015 average net face rents for A Grade space
were at $445 per square meter per annum with incentives typically hovering
around 25%[11]Property
analysts don’t expect the landscape to change greatly over the medium term and
Knight Frank predict that rents will increase by around 3% pa for the
foreseeable future.[12]

The
Chatswood market will remain a difficult one for prospective tenants to crack.
Nevertheless with the area’s enviable lifestyle and upbeat growth prospects, finding
the perfect office space in Chatswood is sure to pay long term dividends for
savvy businesses.